Sales and Use Taxes in New Mexico

April 13, 2006

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When you engage in business in New Mexico you must pay a tax based on your gross receipts. Gross receipts include the total amount of money or other consideration received from the following items:

from selling property in New Mexico
from leasing property employed in New Mexico
from selling services performed outside New Mexico the product of which is initially used in New Mexico
from performing services in New Mexico
any receipts from sales of tangible personal property handled on consignment

Sales and use tax rate. The New Mexico sales and use tax rate is 5 percent. (In addition, make sure you contact your local governments in New Mexico because they are allowed to assess a local sales and use tax.)

Tax-exempt items. New Mexico has many specific items that are exempt from sales tax — for example, an automobile warranty contract is exempt from New Mexico sales tax. You'll want to check and see if you are exempt from the sales tax.

Responsibility for paying sales tax. In New Mexico the gross receipts tax is imposed on persons engaging in business in the state. Persons engaging in business include the sellers or lessors of property and the sellers of services. These persons are solely liable for the tax and are not acting merely as tax collectors for the state.

Use tax. The compensating (use) tax is imposed on persons using services in New Mexico that was not initially subject to the gross receipts tax but which, because of the buyer's subsequent use, should have been subject to the use tax. The use tax is also imposed on the privilege of using tangible property in New Mexico acquired or converted to use by the manufacturer in the following instances:

property is manufactured by the person using the property in New Mexico
property is acquired outside the state in a transaction that would have been subject to the gross receipts tax had it occurred in the state
property is acquired as the result of a transaction not giving rise to the payment of tax but which, due to the eventual use of the property, would have required payment of the tax

Responsibility for collecting use tax. The use tax is imposed on the user of tangible property or services rendered in the state. The user of the property is liable for the tax, but is discharged if the tax was paid to the seller.

Obtaining tax permits in New Mexico. In New Mexico you must register with the Taxation and Revenue Department. Complete Form RP-31, Application for Registration, to register for your sales tax permits.

Leases. Generally, receipts from renting or leasing tangible personal property used in New Mexico are taxable. "Leasing" may be defined as an agreement under which property is employed for or by any person other than the owner of the property for a consideration.

The following discussions address additional sales and use tax issues that many small business owners face: